Condominium Purchase Contracts in the Philippines

A practitioner-oriented explainer of the statutes, rules, contract forms, tax considerations and practical safeguards that govern buying a condo unit in the Philippines (as of 30 April 2025).
(For information only; always seek independent legal advice on your specific deal.)

1 Legal Framework

Core statute	Key subjects it covers	Practical impact on the purchase contract
Republic Act No. 4726 (1966) – “The Condominium Act”	What a condominium is; creation by Master Deed; common–area co-ownership; role of the condominium corporation; foreign-ownership ceiling (40 %)	The unit’s title is always paired with an undivided share in the land/common areas. The purchase contract should cite the approved Master Deed & Declaration of Restrictions. (REPUBLIC ACT No. 4726 June 18, 1966 - The Lawphil Project)
Presidential Decree No. 957 (1976) – “Subdivision & Condominium Buyers’ Protective Decree”	Developer’s registration, License-to-Sell (LTS), advertisement rules, escrow/guarantee, refund & penalties for late completion	A buyer should never sign (or pay) until the project has an LTS; the contract must reproduce PD 957’s mandatory refund and interest clauses. (PRESIDENTIAL DECREE No. 957 July 12, 1976 - The Lawphil Project)
RA 6552 (1972) – The Maceda Law	Cancellation/recission rules for sales on installment; grace periods; minimum 50 % refund after two years of payments	If you will pay in installments, insist that the contract adopts Maceda timelines and refund formula. ([Maceda Law (R.A. No. 6552)
DHSUD & former-HLURB regulations – e.g. HLURB Board Resolution 922 s.2014 (broker registration) and DHSUD Department Circular 2024-002 (escrow exemptions)	Licensing of brokers & salespersons; post-2021 escrow rules for preselling; reportorial compliance	A valid reservation agreement must be signed only by DHSUD-registered brokers/salespersons and must disclose any escrow-account arrangement. (* ql - dhsud.gov.ph, DEPARTMENT CIRCULAR NO. 2024-002 - dhsud.gov.ph)
Foreign-ownership limit (40 %)	Section 5 of RA 4726 plus constitutional 60-40 rule	The contract should contain a warranty that total foreign equity in the condominium corporation will not exceed 40 %. (Ownership of Condominium Units in the Philippines for Foreign Citizens)
National Building Code, Civil Code Art. 1654, Consumer Act & PD 957 s.23	Structural & hidden-defect warranties (five to fifteen years)	Include a clear defects-liability period and procedure for punch-lists.

2 Contractual Instruments in a Typical Transaction

Reservation Agreement – Locks the unit and price for usually 30 days; refundable subject to small processing fee.
Contract to Sell (CTS) – Executed once the buyer begins staggered payments. Title remains with the developer until full payment; Maceda Law applies if on installment.
Deed of Absolute Sale (DOAS) – Signed upon full payment or loan take-out; used for title transfer.
Master Deed & Declaration of Restrictions (MDDR) – Filed with the Register of Deeds (RD); automatically binds all buyers.
Articles & By-laws of the Condominium Corporation – Buyer becomes a stockholder/member on issuance of a Condominium Certificate of Title (CCT).

3 Essential Clauses the CTS/DOAS Must Contain

Clause	Drafting tips	Why it matters
Project & Unit Identification	State DHSUD project number & LTS No.; precise floor, unit, parking slot, and share in common areas	Prevents substitution or downsizing of the unit
Purchase Price & Payment Schedule	Break down: reservation, down-payment, amortization, bank take-out; show interest, penalties, and VAT if applicable	Transparency for Maceda-Law computations
Taxes & Closing Costs	Common practice: Seller pays Capital Gains Tax/Withholding Tax; buyer shoulders Documentary Stamp Tax (1.5 %), DST on loan (if any), transfer tax, RD registration fees (Documentary Stamp Tax - Bureau of Internal Revenue)	Avoids “surprise” closing figures
Escrow/Guarantee Fund (for preselling)	Cite the escrow bank & account no.; trigger for release (e.g., 30 % project completion)	Required under PD 957 and DHSUD circulars unless exempt (DEPARTMENT CIRCULAR NO. 2024-002 - dhsud.gov.ph)
Turn-over & Acceptance	Firm date or “x months after issuance of Occupancy Permit”; punch-list period (usually 60 days)	Enables buyer to enforce Section 23 refunds if delayed
Warranties & Defects Liability	Structural – 15 yrs; workmanship/finishes – 1 yr; concealed defects – 1 yr from discovery	Based on PD 957 and Civil Code
Default & Remedies	Grace periods, interest rate caps (not >1 %/month customarily), Maceda refunds, forfeiture of reservation fee	Balances parties’ rights
Foreign-Ownership Warranty	Seller’s undertaking to monitor 60-40 ratio at all times	Protects foreign buyers from void transfers (Ownership of Condominium Units in the Philippines for Foreign Citizens)
Dispute Resolution	Courts of Pasig/Makati/Taguig, or CIAC arbitration clause common in large projects	Faster enforcement for construction issues
Data-Privacy & Consent	Compliance with RA 10173	Mandatory for collection of buyer’s personal data

4 Regulatory & Documentary Workflow

Developer obtains:
- DHSUD Project Registration & License-to-Sell (pre-sell) ✔
- Building Permit (can now be “post-registration” under HLURB Res. 756) ✔
Buyer’s side:
- Verify LTS & escrow via DHSUD online portal or regional office.
- Sign CTS; pay per schedule; keep official receipts.
- On full payment, sign DOAS → notarization →
- Pay taxes at BIR:
  - Capital Gains/Withholding (usually 6 % of gross),
  - Documentary Stamp Tax (1.5 %),
  - DST on mortgage (0.75 %), if loan.
- Transfer Taxes at City Treasurer (0.5–0.75 % depending on LGU).
- Register DOAS with RD → issuance of CCT in buyer’s name.
- Present CCT to Condominium Corporation --> issuance of stock certificate & entry in stock/transfer book.

5 Buyer Due-Diligence Checklist

What to check	Where	Red flag if…
LTS validity & number of units sold	DHSUD site / developer’s showroom	LTS is “temporary,” “expired,” or unit quota exceeded
Encumbrances on mother title	RD certified title search	Lis pendens or large mortgage annotated
Building Permit & Occupancy Permit	City Hall / DHSUD file	Still pending close to projected turnover
Compliance with 40 % foreign-equity limit	Corporate secretary’s certificate	Ratio already at the cap (foreign buyer cannot register)
Status of escrow releases	Escrow bank / DHSUD	Withdrawals made despite low % completion
Broker / salesperson accreditation	DHSUD Res. 922 list	Not in the roster – contract may be voidable

6 Common Pitfalls & How to Avoid Them

Buying in a project without an LTS. — Demand the LTS before paying; otherwise you risk delayed delivery and limited DHSUD protection.
Assuming the Maceda Law always applies. — It does not cover spot-cash or bank-financed purchases where a deed of sale is executed at once; ask your lawyer how cancellation will work.
Overlooking taxes and move-in fees. — Confirm in writing who shoulders VAT (if the unit is brand-new and the developer has ₱3 M+ sales), documentary stamps, association dues, and CUSA (common-use service area) charges.
Ignoring the Master Deed’s restrictions. — Some projects ban short-term rentals or limit pets; these override any contract “silence.”
Foreign buyers exceeding the 40 % cap. — The RD will refuse to issue a CCT once the cap is reached; reserve early and insert a condition-precedent in the CTS.

7 Practical Drafting Tips for Lawyers & Conveyancers

Quote statutory text sparingly but verbatim for refund and defect-liability clauses—courts look for PD 957’s exact wording.
Attach a copy of the approved MDDR and have the buyer initial every page; it eliminates later claims of non-disclosure.
Include a schedule of construction milestones tied to escrow releases to align with DHSUD Circular 2024-002.
Insert a standing authority for the buyer to inspect the unit during construction (with 48-hour notice) to satisfy Civil Code Art. 1654’s right to inspect.
Cap liquidated damages at statutory interest (12 % → now 6 % per BSP circular) to avoid unenforceable penalty rates.

8 Conclusion

A Philippine condominium purchase contract is far more than a boiler-plate deed of sale. It interlocks with the Condominium Act, PD 957, the Maceda Law, DHSUD circulars, tax regulations, foreign-ownership rules and the building code. Mastering these layers—and reflecting them faithfully in the Reservation Agreement, CTS and DOAS—protects both buyer and seller, enables smooth title transfer, and minimizes post-turnover disputes. Always cross-check the latest DHSUD issuances and local-government tax ordinances, and never sign (or let your client sign) before the project’s License-to-Sell is verified.

Prepared 30 April 2025 (UTC+08:00, Manila).